A New SeASoN, A New ecoNomic outlook

The sharp nip of fall is in the air now, with night temperatures dipping to low single digits, and the trees starting to turn their gorgeous shades of bronze and gold.

September saw the end of my term as Kiwanis Club President. I thoroughly enjoyed my year but am also happy to now be turning the role over to someone else to continue on.

Markets had a good quarter, with the Canadian banks in particular enjoying a solid rally after releasing stellar earnings.

Europe continues to be an overhang, with the region now in a recession, which is not unexpected. There is still a lot of work to be done to resolve the European woes, but they will ultimately be resolved and I expect that to occur with no major bank failures or large country defaults, and with the Eurozone remaining intact.

Emerging markets returns have been weak, with growth in China, India and Brazil slowing. However, developing markets overall are continuing to post higher growth rates than the developed world, and so offer attractive investment opportunity.

Economic data has begun to stabilize thanks in part to efforts by policymakers, with many nations delivering additional monetary stimulus on top of fiscal stimulus. As a result, economic surprise indices are now steadily working their way higher, and I would expect the next quarter to also be positive.

Inside this edition of the newsletter, you’ll find some useful points about ETFs, income trusts and U.S. estate taxes that I hope you’ll find useful. If you are heading south for the winter months, please make sure we have your contact information. Also, remember that you can claim the cost of any out-of-province health insurance as a medical expense on your 2012 tax return.

Safe travels to all.

Carol

cArol A. ivey, cim, cFP, FcSiVice President & Director Portfolio Manager

RBC Dominion Securities Inc.200 - 19 Front Street N.Orillia, ON L3V 4R6Email: carol.ivey@rbc.comTelephone: 705-329-1257Fax: 705-329-2245Toll Free: 1-800-430-8013

www.theiveygroup.ca

I v e y

G r o u p

PRESIDENT OF THE

PRESIDENT’S CLUB 1991

CaROL IvEy

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The NewsleTTer For The INFormed INvesTor | Fall 2012

RBC Dominion Securities Inc.

Ivey Reportthe

2 carol Ivey Fall 2012

exchANge trAded FuNdS (etFS)n An ETF is an investment fund traded on stock exchanges

that holds assets such as stocks, commodities, or bonds,

and trades close to its net asset value over the course of

the trading day.

n Most ETFs track an index, such as the S&P 500. ETFs can

be attractive investments because of their low costs and

tax efficiency.

n ETFs offer investors an undivided interest in a pool of

securities and other assets, and thus are similar in many

ways to traditional mutual funds, except that shares in an

ETF can be bought and sold throughout the day like stocks.

n Unlike traditional mutual funds, ETFs do not sell or

redeem their individual shares at net asset value.

Instead, financial institutions purchase and redeem ETF

shares directly from the ETF, but only in large blocks,

varying in size from 25,000 to 200,000 shares, called

“creation units.”

n ETFs generally provide easy diversification, low expense

ratios and the tax efficiency of index funds.

AdvANtAgeS oF etFS

n ETFs come with lower costs, as well as buying and

selling flexibility.

n Because they typically have low portfolio turnover, they

are tax efficient. They also do not have to sell securities to

meet investor redemptions.

n ETFs provide an economical way to rebalance portfolio

allocations and invest cash quickly. They also offer

exposure to a diverse variety of markets.

n ETFs, whether index funds or actively managed, have

transparent portfolios and are priced at frequent

intervals throughout the trading day.

iNcome truStSn An income trust is an investment that may hold equities,

debt instruments, royalty interests or real properties.

n The trust can receive interest, royalty or lease payments

from an operating entity carrying on a business, as well

as dividends and a return of capital.

n The main attraction of income trusts (in addition to

certain tax advantages) is their stated goal of paying out

consistent cash flows for investors, which is especially

attractive when cash yields on bonds are low.

u.S. eStAte tAxeSMany Canadians do not know that they could be subject

to U.S. estate taxes at death, even though they are not U.S.

citizens or residents.

For Canadians, the exposure to U.S. estate tax depends on

the market value of U.S. situs assets owned at death relative

to the total value of worldwide assets owned at death.

Assets considered to be “U.S. situs” include U.S.-based

real estate and furnishings therein, shares of U.S.

corporations (even if held inside a Canadian brokerage

account, and also includes those owned in registered plans

such as RRSPs or TFSAs), bonds of a U.S. corporation or

government, tangible property situated in the U.S. (such as

vehicles, art, boats, etc.), U.S. bank account balances and

U.S.-listed ETFs.

The calculation of your worldwide assets would generally

include the proceeds of any life insurance policy, 100%

of the value of any jointly-owned property (unless you

can prove that the other joint tenant contributed to the

capital), and property held in trust (which would include

RRSPs, TFSAs and so on).

There is a prorated credit available to Canadians against

U.S. estate tax owing, which for 2012 is US$1,772,800, and

this amount effectively offsets U.S. estate tax on the first

US$5.12 million of worldwide assets. This means that a

Canadian whose worldwide assets are valued at less than

US$5 million will probably not have to pay U.S. federal tax

(state taxes are a separate item and you should check the

laws in the states where you own property).

If you leave U.S. situs assets to a spouse residing in

Canada, who is not a U.S. citizen, there is also a marital

credit that may be available to you for a further U.S. estate

tax reduction. However, it is worth noting that this credit

is NOT available to same-sex couples or common-law

spouses.

Due to the complexity of U.S. estate tax rules, you are

advised to consult with your tax advisor for more specific

information if you own U.S. situs assets and expect to have

a sizeable estate at death.

carol Ivey Fall 2012 3

iN memory oF PhylliS diller

n “ Housework can’t kill you, but why take a

chance?”

n “ A smile is a curve that sets everything straight.”

n “ The reason women don’t play football is because

11 of them would never wear the same outfit

in public.”

n “Best way to get rid of kitchen odors: Eat out.”

n “ I want my children to have all the things I

couldn’t afford. Then I want to move in with

them.”

n “ Most children threaten at times to run away from

home. This is the only thing that keeps some

parents going.”

n “ Any time three New Yorkers get into a cab without

an argument, a bank has just been robbed.”

teASer

111,111,111 x 111,111,111 = 12,345,678,987,645,321

This publication is not intended as nor does it constitute tax or legal advice. Readers should consult their own lawyer, accountant or other professional advisor when planning to implement a strategy. The information contained herein has been obtained from sources believed to be reliable at the time obtained but neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers can guarantee its accuracy or completeness. This report is not and under no circumstances is to be construed as an offer to sell or the solicitation of an offer to buy any securities. This report is furnished on the basis and understanding that neither RBC Dominion Securities Inc. nor its employees, agents, or information suppliers is to be under any responsibility or liability whatsoever in respect thereof. The inventories of RBC Dominion Securities Inc. may from time to time include securities mentioned herein. RBC Dominion Securities Inc. and its affiliates may have an investment banking or other relationship with some or all of the issuers mentioned herein and may trade in any of the securities mentioned herein either for their own account or the accounts of their customers. RBC Dominion Securities Inc. and its affiliates also may issue options on securities mentioned herein and may trade in options issued by others. Accordingly, RBC Dominion Securities Inc. or its affiliates may at any time have a long or short position in any such security or option thereon. RBC Dominion Securities Inc.* and Royal Bank of Canada are separate corporate entities which are affiliated. *Member–Canadian Investor Protection Fund. RBC Dominion Securities Inc. is a member company of RBC Wealth Management, a business segment of Royal Bank of Canada. Insurance products are offered through RBC Wealth Management Financial Services Inc., a subsidiary of RBC Dominion Securities Inc. When providing life insurance products, Investment Advisors are acting as Insurance Representatives of RBC Wealth Management Financial Services Inc. ®Registered trademarks of Royal Bank of Canada. Used under licence. ©2012 Royal Bank of Canada. All rights reserved.

Professional Wealth Management Since 1901.

heAlth tiPthe BeNeFitS oF ProBioticS

Probiotic products are based on the “good” bacteria

that naturally inhabit the human digestive system.

They have beneficial effects on human health that are

increasingly coming to light through scientific research.

The most common benefits are the alleviation of digestive

problems, diarrhea, skin diseases and mouth infections.

The human body contains vast amounts of bacteria,

including the “friendly” bacteria and pathogenic strains

such as staphylococcus and streptococcus, which can

cause disease if they become dominant. Although the

process is not well understood by scientists, certain

amounts of even the “bad” bacteria are thought to play an

important role in the functioning of our immune systems.

When the bacterial balance in our bodies becomes

disrupted, we get sick. The ingestion of probiotics can

help correct deficiencies and bring bacterial systems into

balance, helping in digestion, the processing of vitamins

and minerals, and ultimately boosting the immune system.

Probiotics are defined by the World Health Organization

as “live microorganisms that, when administered in an

adequate amount, confer a health benefit on the host.”

Unlike antibiotics, probiotics stimulate rather than squelch

the growth of certain microorganisms in the human body.

While antibiotics reduce immune system activity as a result

of killing off a wide range of bacteria, the introduction of

certain “good” bacteria into the stomach by probiotics has

been found to boost immune system activity.

These friendly bacteria are found in foods containing

live yogurt, kefir (a fermented milk drink), tempeh (a

fermented soybean food), miso (a Japanese seasoning

made with fermented rice), sauerkraut and buttermilk.

Probiotic dietary supplements typically contain billions

of cells of healthy bacteria, a dose difficult to replicate

naturally in food. The most popular supplements contain

lactobacillus or bifida bacteria, although some brands

contain multiple strains.

Poor food choices, emotional stress, lack of sleep and the

use of various drugs can all erode the healthy balance of

bacteria in our bodies. The widespread use of antibiotics

that indiscriminately kill bacteria in the human body

have resulted in some side effects, as both the good and

the bad bacteria get wiped out – as well as resulting in

the development of stronger strains of disease-causing

bacteria that are more resistant to antibiotics.

Probiotics currently are being studied for new uses,

including the elusive cure for the common cold. Probiotic

use is growing at a rate of 15%-20% a year, based on retail

sales, and this use is expected to grow as research proves

new applications.